|Dunkin' Brands CEO and president Nigel Travis celebrates the Dunkin' Brands Group Inc.'s IPO with a freshly brewed cup of Dunkin' Donuts coffee. (Gary He/ AP )|
Dunkin’ shares soar on first day of trading
Canton chain’s aggressive growth plan drew investors’ interest, analyst says
Dunkin’ Brands Group served up a hot stock on its first day of trading with shares soaring 46 percent above the initial public offering price, even as a looming US debt default cooled the rest of the market.
Shares of Dunkin’ Brands, the Canton company that owns Dunkin’ Donuts and Baskin-Robbins, closed at $27.85 yesterday, up from the $19 IPO price. The company sold 22.3 million shares raising $422.8 million.
Nigel Travis, chief executive of Dunkin’ Brands Group, said in an interview he is pleased with Wall Street’s response and that of Dunkin’ fans who buzzed about the chain on microblogging service Twitter.
“One of the Tweets suggested that we have a Massachusetts holiday to celebrate the Dunkin’ IPO,’’ he said. “We think it’s a good idea.’’
Travis is not waiting for an official declaration. He said he is implementing his own holiday for the parent company and giving employees tomorrow off to celebrate the company’s success on the Nasdaq.
Dunkin’s shares opened yesterday at $25 under the symbol DNKN. In securities filings earlier this month, the restaurant chain had initially expected to sell shares between $16 and $18 a share.
The proceeds from the shares, which represent 19.7 percent of the company, will be used to reduce about $475 million in debt.
David Menlow, president of research firm IPOfinancial.com, said the company’s plans for growth are attracting investors.
“The company has a blank canvas in front of it for expansion potential and there aren’t too many companies with such a big name that have those types of opportunities,’’ he said.
Dunkin’ Donuts has laid out plans to double the chain to 15,000 stores in the United States. By 2012, Dunkin’ Brands expects to open an additional 250 Dunkin’ Donuts in the United States, and 450 to 500 Dunkin’ Donuts and Baskin-Robbins will open internationally.
In the New England and New York markets, there is one Dunkin’ Donuts store for every 9,700 people, and the company plans to focus its growth on existing markets east of the Mississippi River, where there is one Dunkin’ for every 48,400 people, according to the company’s prospectus.
Investors are also sweet on Baskin-Robbins, of which there are 6,482 locations globally, including 2,523 in the United States.
Stephanie Chang, a research analyst with Renaissance Capital, an IPO investment firm in Greenwich, Conn., said Dunkin’s success as an IPO came from its brand recognition, growth plans, and business model.
“They use a franchise model, which makes it easier to expand because their franchisees put up the costs, and they aren’t exposed to commodity costs,’’ she said. Commodity costs are rising this year and some companies expect double-digit increases in 2012.
Clayton Turnbull, who owns 18 Dunkin’ Donuts stores in Boston, said he and his fellow franchisees won’t benefit directly from the parent company’s move to the public market, but he’s happy the IPO was successful because it reflects his business.
“It doesn’t help for us as a brand to fail at anything,’’ he said.
Turnbull said more eyes will scrutinize Dunkin’s balance sheets, which will apply pressure to the company as a whole. He hopes both Dunkin’ Brands and Dunkin’ franchisees can continue to focus on the bottom line - profitability.
In a year dominated by IPO headlines from Internet companies like Groupon and LinkedIn, Chang said the success of Dunkin’s traditional business model is driven by its aggressive growth strategy.
Dunkin’ Donuts opened 400 stores last year in the United States, growing more than fast-food king McDonald’s and coffee giant Starbucks, which shrunk, according to food research firm Technomic Inc. Still Dunkin’ is smaller, ranking seventh among American restaurant chains with $5.6 billion in revenue last year.
The trio of private equity firms that own Dunkin’ Brands - Bain Capital Partners, Thomas H. Lee Partners of Boston, and Carlyle Group of Washington, D.C. - each retain a 26.1 percent controlling interest. The firms bought Dunkin’ for $2.4 billion six years ago.
Dunkin’ shares rallied yesterday despite another bad day in the market with the Dow falling 198.75 points, or 1.6 percent, to close at 12,302.55.
Taryn Luna can be reached at firstname.lastname@example.org.